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  • Writer's pictureInvestment Synergy Team

‘Use it or lose it’ rule for housebuilders amid crackdown on land banking

Housebuilders will be told to “use it or lose it” under plans being discussed by ministers to force them to use land for which they have planning permission.

A crackdown is being considered on the practice of “land banking”, with the introduction of time limits on planning approval for big developments.

More than 1.1 million homes have been approved for construction in the past ten years but have not been built, according to analysis by the Local Government Association. Critics have accused housebuilders of restricting supply to drive up house prices.

Robert Jenrick, the housing secretary, warned developers this year that the government would tackle land banking. He told the Home Builders Federation: “We can’t deny that there is a major perception problem — people feel strongly about this. So we want to take action to ensure builders build out at the pace promised.”

The Times now understands that the government is considering a “sunset clause” — an expiry date for planning permission by which point plots of land must be developed. The deadlines could be combined with levies. Both options would apply only to larger sites to ensure that small and medium housebuilders were not treated unfairly. “We’ve got to tread carefully, but a mixed approach could work,” a government source said.

The government may also tighten rules on retrospective planning permission to ensure that developers obtain approval before starting work. Fees will be increased and enforcement will be stepped up for those who deliberately break the rules.

Boris Johnson has set a target of building 300,000 homes a year by the middle of the decade as spiralling prices lock millions of young people out of the property market. The average age of a first-time buyer has risen to 34.

Ministers will introduce a controversial Planning Bill this year which will stop residents objecting to individual applications for new homes. Jenrick has begun a charm offensive with backbenchers in an attempt to win over the nearly 100 Tory MPs who have indicated that they will oppose it.

The housing secretary will visit Tory constituencies in the southeast and has begun hosting Zoom calls with rebel MPs. Backbenchers have blamed the planning reforms for the party’s shock defeat in the Chesham & Amersham by-election in June. New laws on land banking could go some way to appeasing the backbenchers.

Housebuilders have argued, however, that the problem is overstated. In 2018 the former Cabinet Office minister Oliver Letwin reviewed the problem and found there was no evidence that developers deliberately hoarded land.

Anthony Breach, a senior analyst at the Centre for Cities think tank, said: “Land banking is caused by the existing planning system. In our unusually dysfunctional system, we have the situation where new homes that comply with local plans can still be blocked on a case-by-case basis. In response, builders then hoard a land bank of projects as a safety buffer to manage this risk.”

A government spokesman said: “We are clear that new homes should be built as soon as possible once planning permission is granted.” He said that councils and developers should work together to overcome any barriers.

Investment Synergy - Use it or lose it ! - or is this simply developers future proofing building projects?

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